As Atlanta’s leader in the leasing and management of single family rental homes, Excalibur is uniquely qualified to help investors in the purchase or sale of residential rental homes. We can help you determine market value and assist in getting your existing properties ready to market. We can help you performed tax-deferred exchanges or use installment sale methods to reduce or eliminate your capital gains tax. As a buyer, we can help advise you on which types of properties are the easiest to rent and what the market rents are for specific homes you might consider. Getting Started as a Real Estate InvestorWhile Excalibur provides great tools, information and resources to get you started and maintain your real estate investment portfolio; there are a few considerations before making your first or subsequent property purchase. Have your finances in order Have you checked your credit report recently? Although it is rare, mistakes do crop up from time to time – better to find out now and get them resolved than when you are trying to obtain financing on a great investment property. Check out our obtaining financing section for more details. Do you know what your FICO score is? Lenders will typically have the best rates and loan programs available for those with scores over 700. While some investors with great credit can qualify for 100% loans, most of us will have to have funds available for closing costs and down payments. A great way to leverage your existing property is to take out a line of credit on your primary residence (usually at very attractive rates) as a source of funds to purchase more property. Typically closing costs will be 3% to 4% of the purchase price of the property. For example, if you were to put down 5% on a property, you would want to have roughly 10% of the purchase price as cash on hand. 5% for the down payment, 3% for closing costs and another 2% as a reserve fund in case the property does not rent immediately (or needs fixing up prior to renting). If you do not have access to a line of credit and do not have sufficient funds to cover down payment, closing and reserve funds, there are other methods available. Some sellers we work with offer newly built investment properties where the builder will pay a portion of the closing costs (usually 2%). This can reduce the cash you need to make a purchase. If the gap is larger, you may be able to borrow money from family or friends to get started. The point is, if you are motivated there are ways to get your finances in order to begin purchasing investment property. When you know how much you have to work with, that will give you an indication of your price range. Back to Top Obtaining FinancingEvery time a lender pulls your credit score, it will reduce your FICO score. (This is true for all loan products, including automobile loans, credit card applications, etc.). If you are considering purchasing multiple properties, or “shopping” your loan out, you may want to go through a mortgage broker. Ask them to pull your credit report once. It is usually good for 90 days, so you can be qualified in advance for a purchase, make multiple purchases at the same time or make multiple purchases over the 90-day period without affecting your credit score each time. Beware of the lender that pulls a switch in rates just prior to closing! Some lenders will advertise a very attractive rate at the onset of the loan process, only to tell you the rate is not available when it is too late to switch to another lender. Get references for the particular lender you choose, who guarantees not to engage in this practice. Finding a good lender or mortgage broker who is willing to find the best loan products for you will save you money. Starting the paperwork and being approved puts you in a great position when an ideal property comes up and you need to act quickly. Back to Top Investment Objectives What do you intend to accomplish with your investment? If you are looking for cash flow, you may need to place a larger down payment on the property you select and buy in an area with good rent appreciation. If you are looking for the greatest return on investment, your down payment should be as small as possible. If you are primarily concerned with equity growth, you will want to purchase in areas with the best probability of home appreciation. For the best tax breaks, you will want to buy property in areas where the land is a small percentage of the overall purchase price. Once these three steps have been taken, you will be better prepared
than most property investors to take advantage of and identify
the best investments to suit your individual needs.
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